Friday, July 31, 2009

I wonder what goes through the head of someone like Pablo Triana. He authors a book and a series of articles designed to highlight how conventional risk management tools have failed us, but it’s written for an audience that understands even less about the problem than he does. And to those of us who know better it’s abundantly clear that he doesn’t understand all that much at all.

The broader point of his work is ‘flat earth’ like. He writes about quantitative finance as if it’s the source of some new type of evil. This seems a popular enough rant since much of the 'angry mob' views financial models and higher math with increasing suspicion. And he makes the next natural argument that the best thing we can do in this increasingly complex world is to do away with them entirely. He makes this claim because, like his intended audience, he apparently lacks the facility to understand them. And he’s insisting that the government use it’s considerable force to make sure that the rest of us who know better are all brought down to his level.

Take for example this business week piece he authored. At first glance it looks like just another Goldman hit piece from a mainstream media outlet; just another in a string of countless articles designed to enrage the public against Wall Street’s most successful, and therefore least popular bank. But if you read into it a little you realize that it’s something more. In reality what he’s trying to do is to use the hatred of Goldman, the bank that all self appointed sophisticates loves to hate, as a tool for de-legitimizing the use of VaR (Value At Risk) as a metric for understanding portfolio risk.

To me, someone who’s devoted a sizable portion of his career to understanding all of the commonly used methods for describing risk, this reads like stupidity on stilts. It’s a demand for a government imposed Dark Age. In essence Pablo Triana is trying to argue that because our tools aren’t perfect, we should be forced to cast them aside. He’s saying that since our compass, sextant and pocket watch can’t pinpoint our position with a clarity that even he can understand, we should all be forced to throw them overboard and simply stay within sight of the coast. That way, he says, anyone can manage to understand the rules of navigation, even if it means that we no longer get to go anywhere.

In effect it's a demand by a blind man that the rest of us should all be forced to pluck out our eyes.

Pablo Triana would have you believe he's a deep thinking intellectual but he's not. What he really is, is just the latest in a long line of pseudo-intellectuals who decry all knowledge that they themselves can’t find a way to comprehend. And just like those that came before him, his supreme arrogance is that he can’t admit that the real problem is with his understanding rather than with the tool itself. He presumes himself infallible so if there is any confusion then it must be the fault of what VaR had to say, not with his inability to understand it.

Instead of confessing his ignorance and trying to get a better grasp on what VaR actually does say, he spends his time tearing down straw men for an audience too mathematically illiterate to realize that his villains don’t actually exist in the real world. He wants to ban the use of VaR because it can’t predict the future to his satisfaction, but no one who understands it ever claimed that it did. He scratches and tears at modern portfolio theory and the Black-Scholes options model for their lack of precision but those imprecision’s have been the subject of debate in the industry for two decades, so they are hardly un-acknowledged. And he does his best to depict quants and quantitative risk managers as heretics for claiming that their models speak the whole truth, when no one who understands the models would ever say anything of the sort. We professionals know what approximations these tools are and we never claimed otherwise. It was only neophytes like Triana who did.

He also conveniently forgets that the world that existed before VaR and modern portfolio theory was even more imprecise than the world we see today. It was a world where animal spirits and geometric patterns were the sum of all explanation for the behavior of market prices. It was a world where superstition, bias and ignorance dominated the markets and the industry that worked in them. He ignores the fact that while our present tools may be imperfect, the world we had before them was even more so.

And what he also ignores is that it wasn’t the models that created the financial crisis, although he would clearly have his readers believe otherwise. What actually created the financial crisis was people just like him who misunderstood the models and misinterpreted the results. But that’s probably just his self declared infallibility again. He doesn’t want to his readers to see that the math was all correct and that it was the interpretation of it which was in error because it's the very mistake that he’s making himself.

As an example he compares a CDO and a treasury bond showing them with equivalent VaR statistics and then claims that VaR is inaccurate because it doesn't call attention to their differences. But to those of us who base our livelihood on it, it's abundantly clear that there is a difference between an illiquid CDO and a highly liquid treasury bond so we don't look to VaR to tell us that. It's a question that the tool was never designed to address.

The bonds he compares may also have a similar notional amount or a similar coupon or duration. Those numbers may be similar or exactly the same for both bonds, and aren't considered any less accurate simply because they don't include the difference between them. VaR is a description of one property of a portfolio given certain limits and assumptions. It was never presented as anything more than that. And everyone who makes use of the tool already knows that.

So in effect, Pablo Triana wants to eliminate the use of VaR because it didn’t answer a question that no one but him was ever stupid enough to ask of it.

For decades we in the industry have debated the merits of using one strategy or another to deal with the inadequacies of quantitative portfolio analysis. We discuss, we examine, we debate we consider… and so on over a period of years. That’s how new ideas are brought to light. Even now, many of the best minds in the world are struggling to understand liquidity risk (which was the real spark that set off the credit crisis) and to produce methods to quantify its behavior. But one thing is for sure… no one ever thought it was something that VaR was ever designed to describe… no one that is … except Pablo Triana.

And just to be clear, that doesn’t mean that VaR isn’t excellent at describing other things. But Pablo Triana still wants it banned anyway, and has asked the Obama administration to make it so. OK… fair enough… he’s entitled to his opinion. So what does he propose the industry adopt in its stead? According to him we should use “intuition and experience-honed common sense” in place of quantitative methods for valuing risk. To use an analogy from science, he's demanding that we abandon Newtonian physics for it's imprecision, and instead embrace astrology and 'diving the the humors' when trying to understand the world. And I'm sure that no one will be able to misinterpret something as clear, reliable and proven as that.

The media elite all say that they revere things like intelligence and insight, but the truth is they have always been deeply resentful and suspicious of it. Like any uninformed mob, they don’t trust anything that they themselves can’t understand. It's resentment of the successful that has turned the media against Goldman Sachs. And it's also that resentment that has led Triana to try to link Goldman and quantitative finance to further his argument against both. his view isn't based on anything reasonable or rational, but it will still be popular with people like Arianna Huffington, Jon Stewart and Bill Maher. And that’s exactly who he’s trying to impress. His argument doesn’t lead to enlightenment (quite the contrary), but it’s far more likely to get him a TV spot than a more serious idea which does.

Of course, none of those people (including Triana) are really the intellectuals they pretend to be. The truth is they possess unremarkable intelligence, and don’t really understand any more about complex issues than the average Joe. So when a guy like Triana with just enough knowledge to be dangerous claims to have discovered a bit of heresy and offers a chance to cast real intellectuals into the pyre, those same media elites become the leading edge of the illiterate mob. They are just as anxious as anyone to throw all rationality aside and grab a torch.

Triana is really just a fool who mixes populist ranting against straw men with just a hair of actual knowledge. But he's bound to get a sizable audience because he says what everyone wants him to. A flat earth And speaking for those of us who make our living near the edge of the map in those waters he's so afraid of,. "There be no dragons here" and we won't fall off the edge.

VaR is a useful tool with known limitations. Well ...at least they're known to everyone but Pablo Triana.

This reminds me of a scene from that classic movie ‘A Fish called Wanda”. This clip has got Triana’s name all over it:

Triana doesn’t understand VaR so he says it should be banned. Thankfully, it doesn’t look like anyone but the pseudo intellectuals are taking him seriously.

Although to give her credit, the far left has gotten a lot of success recently by pretending to be something they're not. Barak Obama was a radical leftists who got elected president by pretending to be a centrist Democrat. The house passed a bill to impose a massive tax on energy on the claim that it would create jobs, and time and time again we're told that the best thing for the economy would be for the least efficient actors in it (the govenrment) to spend the most amount of money.

Now Katrina Vanden Huevel is saying that the government would be fostering competition in the healthcare marketplace by providing a huge taxpayer subsidy to one player and making the rest cope with it. She's pretending that destroying competition and encouraging it are the same thing. She knows better... she just believes that you don't. Thankfully, she's being called out on it.

The Whitehouse is hoping you're that stupid too. Unfortunately the media isn't as interested in calling out Obama when he says something stupid.

Tuesday, July 28, 2009

Monday, July 27, 2009

Or at least it explains why, since the death of Walter Kronkite, Stewart is now America's most trusted source of News. Katy Couric's continued popularity with the media elite continues to defy explanation.

Friday, July 24, 2009

My buddy Tim sent me this. He and I are about the same age, and are interested in all the same geeky things. We're part of that generation that wanted to grow up to be astronauts. Names like Niel Armstrong Buzz Aldrin were our gods.

This video has three of my favorite things, the Mythbuster guys (probably my favorite show on TV) a judge that knows the meaning of the word Justice, and a septuagenarian American hero proving he still has 'The Right Stuff".

I just got a note from a friend that was all but bubbling over with liberal platitudes about how this recent story proves that corruption is “the real problem’ in NJ. He was insisting that I should write more about it. And since many of you might be wondering why I usually ignore stories like that I’ll answer him here.

First of all, I’m not a journalist (and I have no ambitions to be) so I don’t care about informing people. But assuming that I was… is there anyone out there who didn’t already know that we have corruption problem in NJ? Every two years or so the federal prosecutors round up a bunch of politicians who were less good at covering their tracks than the rest. About half the time they also threaten to arrest a major political figure like the Governor or a Senator, or both. It’s as rare an event as high tide and hardly newsworthy if you ask me.

Secondly, even if the story wasn’t being covered by every two bit, dimwit mainstream journalist in the country, and even if there were still something to say about it which was both original and proved my broader thesis, the fact is, I don’t think corruption is the real problem in NJ at all. In fact I think it’s really just a distraction from the ‘real' problem.

The typical reaction to the not quite semi-annual corruption story is for the press to see what party the arrestees belong to and publicize it in their ‘oh so reliable’ way. If they’re Democrats they call them a ‘major political figure’ and if the are Republicans the call them “a major REPUBLICAN political figure”. Then the masses read it and elect the candidates from the other party, whichever that is. Then we all go on for a few more years until the new people get arrested and it all starts over again. But nothing changes for we peasants in NJ because the new guys are the same guys as the old guys.

Even though these guys all claim to represent 2 different political parties, they really don’t. The fact is, in terms of policy and practice, the differences between NJ Democrats and NJ Republicans are as modest as they are anywhere in the country. Our Republicans are pro-abortion, anti-gun, pro-union, and believe in a big spending, intrusively regulating government just like our Democrats. Anywhere else in the country they would be called Democrats.

(And I know I might get a note here from someone saying that this person or that in the legislature or town council somewhere is different in some way... but spare me. There are outsiders in any group and if he or she want's to move up in the machine they'll have to find a way to change their story to the party line. Besides, whoever it is I'm sure they are politicians first, so I'd check your watch and wallet after you meet with them if I were you.)

In practice, we're a one party state run by a single political machine which controls both parties from behind the scenes. That machine is run by the unions, by the civil servant class, and by a collection of powerful insiders and interest groups. And the one thing they all have in common is that they view we taxpayers as the idiot serfs who exist only to feed their machine with tax dollars.

We haven’t been citizens in New Jersey for a long time, we’re all mere subjects. We are ruled utterly by an elite class that is unconcerned about our opinions and disinterred in having us participate in government in any way except to pay for it. I know it’s laughable to some to describe that useless gaggle of mouth breathers in Trenton as an ‘elite’ but that’s what we’ve come to. I can think of no group of people for whom I hold a more universal contempt than New Jersey’s elected class. And if their policies are any indication, the feeling is mutual.

Until we figure out how to gut the state's political machine we’re never going to be free citizens in NJ. And electing this person or that person is not going to do it. If you live in NJ and don’t know how cheap talk is from a Trenton politician, then you are as stupid as the politicians and civil servants believe you are.

They will all promise to lower taxes, raise benefits, and have lots of free giveaways and perks for the members of the CWU and the IBEW. They will all promise a new era of accountability, and responsible spending. They will all promise to be the man (or woman) who will finally change NJ. And when the federal prosecutor leads them away in handcuffs, they will all swear they didn’t do it and if they did, it was only because they were a ‘Gay American’.

The good news is, the unfunded pension liability for NJ is so large that it’s going to bankrupt the state in another few years. California’s present is our future and it doesn’t matter who you elect. When that happens, it will take out all these thieves and liars so I don’t see a little corruption as such a big deal. It all looks to me like the waiters stealing the dining room silver from the kitchen of the titanic. One way or the other, they’ll all end up on the bottom, so I don’t much care if they fill their pockets first.%%%%%%%%%%%%%UPDATE%%%%%%%%%%%%%

Thursday, July 23, 2009

Of all the deceptive and misleading talk around the Healthcare debate, nothing is a more distorted than the discussion of using a ‘public option’ as part of a “Market Based Solution” to keeping costs down. I don’t know if it’s intentional distortion or simple ignorance, but the discussion between politicians and the talking heads has wandered far from the truth. So let me clear it up for you a little.

When there is an actual market, it’s based on consumers of like products making a free choice between them. A market uses the price of each choice to communicate it’s value to the consumer... choices that cost more provide greater value, and choices that cost less provide less value. Then with each person deciding for themselves which values are worth their cost and which aren’t, the ‘best’ options will become the most popular.

This is how any free market works, be it in apples, or crude oil futures, or used cars. This is a simple concept …economics 101. The only time it doesn’t work is if you refuse to allow consumers to make a free choice, or refuse to allow providers to set their prices as they see fit. Those are precisely the two things that government does when it tries to ‘fix’ something, and it's doing both in the healthcare industry right now. This makes the market for healthcare inherently less efficient than it would otherwise be.

For instance, when the law mandates that the people getting the benefit of a particular choice and the people paying the bill for it are two different people, the market fails to function correctly. In a situation like that the person getting the benefit wants the most expensive option because it includes the best benefits. Cost is irrelevant to them because they aren’t going to be paying it. Meanwhile the person paying the bill wants the cheapest option because … well because it’s cheapest. To them it’s the quality of the product or service that’s irrelevant because it isn’t them who will be receiving it. When you add a negotiation between the purchaser and consumer, it might still be possible for a market to work all that out. But if it does mange to do so, it will be a much less efficient process than an actual free market would be.

This is the current state of affairs in the healthcare industry in america today. Employers pay the bill, and employees receive the service. Employers care only about cost, and employees care only about quality. The market works more or less, and American’s attitudes toward their current health plans reflect that. But even at its best it’s a horribly inefficient system. And its government’s participation in the system that makes it inefficient. Government isn’t improving the market for healthcare it’s doing all it can to prevent it from functioning correctly. It’s making sure that the value for consumers and the price for purchasers have as little to do with one another as possible.

When we add ‘a public option’ to all that, we don’t get more choices and a more efficient market, we get fewer choices and a less efficient market. Why? Because a public option includes a taxpayer subsidy designed to artficially lower its price. The public option may cost more overall to produce than the best private plan, but since it’s price won’t reflect that cost, the purchasers of the plan will have no way of knowing it. And in an already distorted market where purchasers and consumers are two different people, this would be a recipe for disaster.

Since the price of the public plan will be artificially low compared to similar private plans, most employers will choose it regardless of the value it provides. So the consumers of the plan will have a choice of taking a public option, or paying for their own insurance. But taxes are not optional… we will all be required to pay our share of ‘the public option’ whether we use it or not.

So anyone who wants to buy their own medical insurance will be paying those taxes plus the cost of whatever private insurance they buy. Their total cost for healthcare will be something like twice the cost of the public plan. And since it’s a rare company that can charge twice the price for a similar product and manage to stay in business, eventually the ‘public option’ will drive the private medical industry out of business.

That’s how it works. That’s the real world… not the world of politics. Anyone who says it won’t be that way is either hopelessly ignorant, or is lying to you.

In the world of leftist politics they believe that the inefficiency in the healthcare market comes from ‘profits’, but that isn’t really an issue. ‘Profit’ is just the tiny sliver, pennies on the dollar in the best of times; that a company has left over after they pay everyone else they owe money to. In Nancy Pelosi's world of unicorns and rainbows, eliminating the profit will mean a dramatic 'savings' for Americans. But as I said, this is either dishonest, or ignorant.

But if congressional Democrats are really concerned about removing profit, all they have to do is deregulate the healthcare industry and the market will take care of that for them. A company with a tighter profit margin can charge less for the same service than a company with a fat one. If their price communicates that to consumers, then they’ll act accordingly. It’s a mistake to say that the market for healthcare is currently broken and only government can fix it. The fact is, it’s the government that’s broken the market for healthcare, and only eliminating the government participation can fix it.

The president talks about the status quo bankrupting our country, but it isn't the private medical industry that's doing that it's medicare. Medicare has promised 54 Trillion dollars in benefits to present and future retirees that they can't possibly hope to pay. that's where the real problem with the healthcare market lies. They know they can't afford to borrow that money anymore, and they dont' want to say no to the people promised the benfit. So they want hide the mismanagement by sucking the rest of the industry down into the hole with it.

It isn't the healthcare industry that needs fixing but the government participation in it. It's medicare that needs reforming, not the private sector. and the solution to that is not to force more people to accept a government plan as their medical care provider.

There will be no competing with a public option, and the Democrat description of ‘a market for healthcare’ is disingenuous. It’s just another shameless power grab by political class that believes that you’re too stupid to make your own choices.

Wednesday, July 22, 2009

NJ hasn’t issued a concealed carry permit to anyone but a policeman in over 25 years. There are no laws on the books to prevent permits from being issued, but none have been issued anyway. If we are a nation of laws rather than a nation of men, then you would think that they would at the very least spell that out for us. If our legislature, in its infinite wisdom, thinks we’re all too irresponsible to defend ourselves, they should at least come right out and say so by writing a law to that effect.

But that’s not the way it’s played out. And the reason it hasn’t is that politicians have found that the unwashed masses don’t usually respond well when they come right out and say how stupid they think they are. Politicians may not think much of the peasants, but they do know that they don’t want to anger them. So instead, like a parent who tells their child ‘we’ll see’ when they really mean no, they simply dodge the question and try to avoid an argument. But politicians aren’t our parent’s, they’re our employees… and if we’re going to be prevented from exercising our rights, then at the very least we deserve to be told why.

In New York City, they aren’t so egalitarian about it. Lots of people can get permits to carry a firearm, but you can’t be ‘just anyone’. You have to be special and among the elite. Anti-gun zealot Rosie O’Donnell’s bodyguard has one. So does anyone with the right kind of political connections. And if you make the right kind of donation to the right Democratic Party PAC, you can have those connections too. Chuck Schumer and Carolyn McCarthy may talk like they are opposed to any private gun ownership, but when the rubber hits the road they still have campaign contributors to placate. So for them carry permits are like that old joke… they are willing to concede the first point, and now it’s just a question of negotiating a price.

Both the defacto ban in New Jersey and the ‘common people’s’ ban in New York City are the perfect way to handle the issue as far as anti-gun zealots are concerned. The fact is, the anti-gun position is a political loser in America and both parties know it. The Democrats may not fear the shattered Republican party, but they certainly fear the NRA. And the only reason they got control of the congress in the first place was by running pro-gun Democrats in the Midwest and west.

Even the Supreme Court (In the recent Heller vs. DC decision) has plainly stated that the right to ‘keep and bear’ arms is a fundamental and individual right. This knocked the wind out of leftists dubious claims that it was really about the militia. And the trend has continued when the 9th circuit appeals court found that the second amendment is ‘incorporated’ and can be enforced against the states like the right to vote for minorities. So with those rulings in hand, everywhere that an outright gun ban is on the books the NRA has launched a lawsuits to overturn it. Every unconstitutional gun law in the country is now on borrowed time.

But that doesn’t apply to these ‘laws that aren’t laws’, so they have become the only means left for elite anti-gun zealots to impose their minority opinion on the unwashed majority. Think about it….if there is no specific law, then there is no specific law to overturn. If it’s perfectly legal to obtain a carry permit in New Jersey, then it’s certainly not their fault if no one has gotten one in over 25 years. There is nothing for the NRA to get upset about because there is no law on the books at all. In effect, for those who want to deny people their rights it’s a perfect solution, and the gun-ban crowd has relied on it for some time in these parts.

Enter John Thune, a Republican from South Dakota. At first glance he’s not the kind of guy you’d think I’d be a fan of. He’s a career politician from a small South Dakota town, who was head of his state’s Republican party for a while. He’s a born again Christian which I ‘m OK with as far as it goes, and he’s got an MBA so it’s possible that he might know a little something other than politics. But it’s no stretch to say that his experience must be very different from my own.

With that said though, I’ve become a fan because John Thune has just crafted the perfect gun law. What he’s done is he’s sponsored an amendment which if passed, will require states to offer reciprocity for concealed carry permits granted in other states. If your state has a law which restricts carry rights, this amendment doesn’t change that. It only means that if you have a concealed carry permit in one state it will be effective in the next state so long as you obey the specific rules of concealed carry holders in that state. Think of it as being the same as a driver’s license. Your Texas or Florida license is valid in New Jersey, but you still must obey the traffic laws in that state.

This is a perfectly reasonable law where the federal government is only requiring a minimum of uniformity between states. But this amendment would also mean that the gun-ban crowd that’s been clinging to it’s position in the northeast through extra-legislative bans will be out of business. It will no longer be enough for New Jersey to just never issue a permit. That sort of non-ban gun ban won’t fly anymore. Because someone like me who can own a firearm legally can simply apply for non-resident permit from Florida or Utah and it will automatically be valid in New Jersey and New York.

This is such an inspired piece of legislative brilliance that my past experience with government leads me to believe it must have been an accident. But there is more. Mr Thune has attached this amendment to a ‘must pass’ funding bill for the armed forces. If it doesn’t get passed, the Army doesn’t get paid… and even the Democrats in congress know that something like that would be political (and maybe national) suicide. If this was all by design then John Thune has just become my favorite man in the Senate.

This bill doesn’t override state laws so states with more reasonable gun laws won’t see any reason not to support it. It doesn’t intrude on States rights or impose a national standard of any kind. And it also won’t prevent New Jersey and New York from imposing a ban on carry permits if they still want to. All it will do is require them to pass a law to do so, rather than doing it through procedural and bureaucratic means. In that way it forces our legislators to do their job, and to enforce the rule of law instead of the rule of men.

The crime, violence, and accident statistics all firmly support the right of free citizens to be able to defend themselves and John Thune clearly knows that. His abbreviated OpEd in the New York Times was so understated and ‘matter of fact’ that it almost seems like he can’t understand what all the fuss is about. But the truth is, we already know that concealed carry won’t lead to any of the hyperbolic fear-mongering that the anti-gun minority says it will. And the fact that they’ve been unwilling to pass a law which supports their position tells us that they already know it too.

So New York and New Jersey may get rational gun laws with the single stroke of a pen. And if they do it will be thanks to a career politician from a small South Dakota town. He wasn’t who I was expecting, but lord knows none of our politicians would have done it. Was the lone ranger from South Dakota? I’m not sure. But if this law passes then we in greater New York City will know who we have to thank for it. There will be no wondering ‘who that man was’. And for my part, I’ll plan some time to make fundraising calls for him.

Tuesday, July 21, 2009

Does anyone else think it’s odd that the Democrats in government are doing all the things that the Corleone family did in "The Godfather"? “We have the unions and the gambling, and those are the best things to have.” said one memorable kraut-mick consiglieri. The union’s domination of the Obama Whitehouse is well documented and several left leaning state government’s are now embracing gambling as a means of producing tax revenue.

The next thing which the Corleone’s were interested in was drugs, and although the stodgy Don in The Godfather thought it was bad business, Don Barak apparently doesn’t feel that way. He’s pushing full force to get a cut of the drug (and general healthcare) trade. And everyone knows about how he negotiated with the Bank CEO's as if he had a pistol on the table.

I suppose I should be more disturbed that these days our government so closely resembles a criminal enterprise, but to be honest I’m surprised they aren’t being more straight forward about it. The Corleone family’s popularity hasn’t diminished since the 70’s and standard liberalism has had two major defeats during that time. Maybe they should quit the pretense of claiming to help the little guy and come clean by saying that they’re only trying to get and keep ‘turf’.

So based on this model, what happens next? Well I guess that depends on who you cast in the Al Pacino role. Joe Biden has been spending a lot of time overseas lately, but most people think he has more in common with Fredo than Michael Corleone. That would make Nancy Pelosi the Michael character since she was sent to Chine to keep her from the press after her 'The CIA lied to me" debacle. It's also pretty easy to imagine her bumping off the heads of the other five committees. Ted Kennedy will finally end up sleeping with the fishes, and Barney Frank will end up gun down in a revolving door someplace.

Personally I don’t think Don Barak’s lieutenants will be waiting until the funeral to turn on him, but I'm sure that's still a way off yet. But if I were Ben Bernanke I wouldn’t get in any car where David Axelrod or Rahm Emanual was sitting in the backseat. (Remember the ‘take the cannoli’s’ line?)

Congressional Democrats only won the House and the Senate because they ran pro-life, pro-gun candidates in the midwest and mountain states. And now that Obama's popularity is beginning to wane, it will be politics as usual. Mark my words, if Obama suffers one political failure then half the reps in the house will be pushing women and children into the cold dark water to get a place in the lifeboats.

They say that a blue dog is just a yellow dog that's holding it's breath. They hold it pretty well when they're under the waterline.

Friday, July 17, 2009

This is a heartfelt note to any liberal readers. If you’re a right leaning reader of this blog, then you should send this essay to a liberal that you know. I’m not looking to annoy them, and I’m not trying to just win an argument. I’m not looking to persuade anyone that their broader view of the world or their political philosophy is wrong headed. In this particular case all I’m genuinely trying to do is help… just like they are.

That’s right liberals… I know that the vast majority of you are genuine in your desire for a better world and a better America. I disagree with many of the means you choose to get us there, but in my mind your goals were never in doubt. And because that’s so, I’m hoping you will take me at my word now when I say that I want the very same thing. My goals are the same as yours, to make America a place where everyone is treated fairly.

It’s important that you take me at my word on this, because I want to teach you something important that the experiences of my life have taught me and that your very different experiences have probably not yet taught you. It’s important you learn it now because we’re out of time, and there is a great deal at stake for all of us. I want to make it clear that unlike many people you’re hearing from on this issue, I have no reason to lie to you on this topic. And the point I’d like to make in a nutshell is: The House Democrat’s plan for changing our healthcare system will not only fail to make things better, it will make things much, much worse. And it’s the poor for whom it will make things the very worst.

Like I said, I’m not just trying to win an argument here. I have nothing to prove. But you need to know how these politicians and their hired guns are lying to you. You know the ‘savings’ that Nancy Pelosi keeps talking about? There isn’t going to be any savings. The House Democrats are hoping that they can simply deduct the profits made by the insurance and drug companies from the total medical cost, and call it ‘savings’. But it isn’t going to work that way. To be frank, I’m astounded that they have the nerve to even make such an utterly ridiculous claim.

Let me explain it this way. There are only so many doctors, nurses, MRI machines, blood labs, and hospital beds etc. in America. There is no plan to change that number in any meaningful way, and there are only so many hours in the day that they can be used. It’s a finite thing. There is no way for the government to divide this finite amount of medical care among a larger group of people and have it be cheaper for everyone. Each persons’ slice of pie will be smaller… that’s it. This is a simple mathematical fact… it isn’t a trick, and there is no law you can pass to change it.

In addition if you make a service ‘free’ then the people who get the service no longer care what it costs. Only the person paying the bill will care. You may say ‘well that will be the government, and they will pass a law setting low prices for medical care’. But that doesn’t’ work either. That’s called ‘price fixing’. And every time in human history that price fixing has ever been tried, it has resulted in shortages in the things that people want most, and surpluses of things that people don’t want at all. This is an absolute and incontrovertible historical fact. It’s not something that can be ‘a matter of opinion’; it’s mathematics, not philosophy or politics.

Some of you imagine that the key to make it all work out better for everyone is to eliminate the profit of the insurance companies, drug companies, and other big corporations but that doesn’t work either. Even if you could persuade the millions of people involved to contribute their part of our medical care for free, the math doesn’t come close to filling the gap. A government bureaucrat with a guaranteed pay and pension works a lot less hard than an insurance executive whose boss is always on him to improve the bottom line. We’ll be paying him the same amount to do his job, but will be trading hard working clerks who are trying to squeeze out a sliver of profit, for people who are as hard working and concerned with doing a good job as the surly counter staffers at the department of motor vehicles. Like I said, this isn’t a question of economic philosophy it’s just math. You don’t have to agree with my viewpoint about incentives and free markets; you only have to agree that 2+2=4.

You don’t even have to betray Obama to concede this point. You can still be among the faithful. Obama has only talked about the goal of improving healthcare and I think most of America will concede that point. We can all think it’s a laudable goal, but we cannot choose this direction to get there. You cannot let this plan of the House Democrats pass. It will make things much worse for everyone especially the poor. I can fly to Dubai to get my cancer treatment if I need to but when an MRI’s is being rationed by the government, or being reserved for those with good political connections, where’s the poor person going to go then?

I’ll even concede that Nancy Pelosi might know so little about economics that she truly believes this plan will make things better. But the economists who work for her are lying to you. They do not believe that it will help anyone but them. And it will only help them because they can take credit for doing their master’s bidding. They are happy to make America worse for everyone else if it makes things a little better for them personally. You are absolutely being lied to by people who absolutely know better. You have to stand up and let congress (both Democrat and Republican) know that you are too smart to be lied to in this way. For them it isn’t about making things better, it’s about changing things so they are in charge of more of our lives. It’s really nothing but a massive power grab.

You can still think life would be better if the government gave us more “free” stuff. You can still believe in taxing the rich 110% of their income. You can still think Obama will save us all and I won’t complain about it (well…. not in this essay I won’t). But you have to let congress know that you won’t support this. You can’t. It will mean disaster. You have to remember that Nancy Pelosi and the congressional Democrats are politicians first, and representatives of the people second. They are doing this to help themselves, but it will only hurt you.

And if you’re a conservative and you’re reading this, (here’s a special shout out to Izzy’s guys in Chicago) please send this to a liberal. In fact … send it to every liberal you know. I promise that I won’t be snarky and condescending to them (like I usually am). I’ll be civil and polite to the limits of my tolerance, because they need to understand what a big mistake this legislation is. And if answering their economic questions honestly will do that, I’d be happy to help.

I don’t make any money on this blog… I’ve never even tried to get advertising. I’m not after notoriety… if I were I’d have my full name everywhere and be more self promoting. I’m not interested in fame (actually I’m horrified by it), and I make all my money elsewhere. I only write this blog because I want the world to be a better, fairer and more just place. I have no personal axe to grind here except in trying to prevent a horrible mistake.

Next time it’s right back to snarkiness and condescension because it’s fun. But not this time… there is too much that we’re about to lose. So please send this to a liberal… send it to a bunch of liberals. And if they can be persuaded by facts then I’ll be happy to share them. We all want America to be a better place. And we all need to know this isn’t the way to make that happen.

Thursday, July 16, 2009

In an unsigned OpEd today, the New York Times is making the argument that the government should be authorized to disarm anyone living in public housing. This opens a debate which I think is fully warranted, and represents a serious threat to the well being of our country. I’m pleased to see that the New York Times is willing to acknowledge that rights aren’t absolute and that being ‘on the public dole’ is an appropriate metric by which to limit American citizen’s rights.

In fact, the NYT goes much further than that and comes out in support of the idiotic bill proposed by the increasingly antique Frank Lautenberg that proposes that anyone who is even suspected of doing something wrong should have their constitutional rights limited. I don’t go that far, and only a 'political fanatic' would in my opinion. But I do think this is an appropriate time to begin to consider whether to limit the rights of those in public housing or on other means of public support.

For the record, I don’t think we should force those in public housing to surrender their right of self defense. (In fact I think we’d see far less violence in public housing if we insisted on everyone owning a gun instead of surrendering them... but that’s really a separate debate.) But since the New York Times has made it clear that it’s OK to force those on public housing to surrender a right, I do think it might be appropriate for them to surrender their right to vote.

It is irrational in the extreme for a society to allow a person to vote for their right to benefit from the labor of others. History is replete with examples of how this inevitably works out… only the most illiterate can be unaware of them. The tyranny of the majority is as absolute and as evil as any other tyranny, and only adolescent ‘cult of democracy’ fools deny this simple fact. By allowing the bottom 51% of the country to use the ballot box to pick the pockets of the top 49%, we will ensure the inevtiable collpase of our once great nation. It's a clear recipe for disaster.

To simplify things, I think it would be appropriate to set the level this way: "no one should be allowed to vote unless they had a positive tax burden in the prior year." If they are paying a part of the bill, however small, then they should have a say in how the money is spent. But if they are not, then there is no reason to allow them to use their vote to ensure that they get a larger slice of a pie that only others have worked for. If you're surviving by the generosity of others, then you aren't a citizen, you are a dependant. And it would be in the interest of the country at whole for you to surrender your voice.

I’m pleased to see the New York Times open the door to debates like this. I think it’s in the interest of all American to decide which rights to deny those on the public dole and which to grant, and I’m particularly pleased to see them admit that these are questions worth asking. The Times think self defense should be denied them and the right to vote maintained, while I think the reverse. Both are valid questions and I look forward to them becoming a part of mainstream political discussion.

Friday, July 10, 2009

Maxine Waters, the stupidest woman in congress, would like to ban all CDS's. In that regard she's on the same basic ground with the members of Daily KOS and FreeRepublic both.

In spite of their ideological differences, both of those forums would like to ban all sorts of financial innovation on the understanding that only by simplifying the financial markets to a level where they can be understood by a junior high school kid, can liberty and fairness prevail. In their view anything else constitutes one of the twin evils of open markets.... 'speculation', or 'manipulation'.

(Just to be clear, the assertion is that stocks can only be bought, commodities can only be sold, and no one is allowed to have any advantage over anyone else, for any reason.)

The folks at FreeRepublic would also like to see most of the members of the financial services industry placed in some form of indentured servitude to the taxpayer, while I think the Daily KOS membership tend to prefer the idea of nationalized labor and reeducation camps. But they all agree that the purge should begin with derivatives and program trading staffs over at Goldman Sachs. And that it should eventually extend to the entire staff at every Bank, Hedge Fund, and investment company in the country. As far as I can tell the rule seems to be that if you've made money in the markets you must be guilty of something.

Personally I think it's a shame that the far left and far right have found a common ground and that common ground has turned out to be profound stupidity.

Thursday, July 9, 2009

With all the interest taken by the mainstream media in the machinations of Wall Street recently, I think it’s fair to say that financial illiteracy has increased rather than decreased. Now, instead of having a public which is quietly oblivious of the financial world around them, we have a public (and press) that still doesn’t understand the markets, but who now believe that they absolutely do. So instead of a mob who is ignorant and needs to be educated, we now have the same mob who first needs to have have the falsehoods they believe corrected before they can learn anything about finance at all. The net of all this is that the far right is looking dangerously similar to their far left peers. They are demanding that government do things that would not only ‘not help’ our economy but would make matters substantially worse.

No better example of that can be found than the far right’s view of Ben Bernanke. I’ve been very critical of Bernanke in the past because he had little private sector experience, and that lack of knowledge has hampered him in the past. He's been cloistered away at Princeton University in a protective academic cocoon for the bulk of his career. In his heart of hearts he’s an academic, and when he took the job as head of the fed under the Bush administration, that’s all the experience he brought to the table. But that isn’t to say that his academic experience was irrelevant or meaningless either.

There are many academics, like Paul Krugman for example, who spend their entire careers building a political philosophy around the idea of self congratulation. They hide behind a convenient mask of ‘free inquiry’ while they develop a vision of the world where everyone would be compelled by an all powerful government to obey their every word. That’s been my stated view of academia for some time, and I think it’s a pervasive problem, but I never thought that described Ben Bernanke.

On the contrary, Bernanke has proven himself a serious thinker with a deep and abiding knowledge of the history of the modern financial markets and the role that money supply has played in them. Unlike too many of his peers, he didn’t use the protection of tenure as an excuse to fall into complacency and mediocrity, but instead continued to publish important and meaningful work right up to his appointment at the Fed. He has proven himself a man who isn’t nearly as interested in self promotion as he is in understanding the truth of economics and finance. And in academia that makes him unfortunately rare.

But more than that, he has always made it clear that he understand the effect that inflation and deflation would have on the living standard of Americans. Prior to his appointment he had a reputation as an inflation hawk, meaning that he was less prone than his peers to accept modest inflation as a trade-off for higher economic growth. And while that view may have been fine with the people who appointed him, it puts him at odds with his new employers.

When Barak Obama was elected President, we got a chief executive that had little understanding of modern economics, and whose domestic policy was based on a ‘pie in the sky’ liberal ideology where short term intentions were considered much more important than long term results. His appointment of Tim Geithner as Treasury Secretary reflected that. Geithner has since enhanced his image as a financial hatchet man who will do or say whatever is necessary to get the President’s agenda adopted, and the best interests of the country be damned.

To be fair to Geithner, that’s his job and he's pursuing it with vigor. His is a political role and getting policy adopted is what it’s about. But that isn’t the job of the Federal Reserve chief, even if the Whitehouse would prefer it to be. The Federal Reserve was designed to be independent of government and free from political influence. But the Obama administration doesn’t believe that any aspect of American life should be free from government intrusion and the first place that they’ll need someone who is … “agreeable” to their agenda is at the Federal Reserve.

There are few informed people who think that Bernanke will be a good fit for the Obama view of a politicized Federal Reserve. And the view among financial pro's is that he'd be uncomfortable rubber stamping a monetary policy that comes from the Whitehouse. the generally held view among the well informed is that Bernanke sees his role more as an adviser to the Whitehouse and Congress than as a subordinate. And I think if you looked in his heart of hearts he’d tell you that it’s part of his job to defy the presidency if the policy it advocates is contrary to the interests of Americans. But it's unlikely in the extreme that Obama will share that view.

In the coming months the consequences of the government’s irresponsible spending will begin to arrive in the form of higher interest rates, and economic growth will begin to slow because of it. And when that unavoidable consequence occurs, the Whitehouse is going to try do what leftists ideologues have always done in circumstance like that… they will want to monetize the debt. They will pressure the Federal Reserve to print more money and to use it to buy the newly issued debt to keep rates down. This will seem like a perfect solution to the Obama team because it will solve the short term political issue, so they won't give the long term consequences even a second thought. And the last thing they will want in that situation is an intelligent and independent Federal Reserve chief standing in the way of their plans.

In the meantime, well intentioned but considerably less well informed people like Glenn Beck and the members at FreeRepublic, all seem to believe that Bernanke is complicit in the destruction of America as head of the Federal Reserve. They see the actions that he and Hank Paulson were squeezed into by Congress as being part of a grand design on their part rather than an unfortunate compromise driven by political naiveté. (As is the generally held view among financial professionals) What’s more, they see the Federal Reserve as a bad thing in principle so to them it's head must be some sort of cartoon villain. And they are also lobbying hard to get its books opened up for an audit by congress and to make the bank more responsive to the historically irresponsible legislative branch.

But by looking for political solutions to their problems; problems that should best be left to market forces to solve, these well intentioned people on the right are playing into the hands of their opponents on the left. They are handing them another means to obtain the power and authority to do exactly what the right has always feared most, the destruction of the dollar and with it the American living standard. The left is pursuing its separate plan to ‘empower’ the Fed to be a super-regulator. That will make the Fed an official part of the government’s regulatory framework, and the effect will be to politicize monetary policy in another way. So its particularly ironic that the short term goals of the right now play so well into the hands of leftists who are using a different method with similar goals.

With all that said though, none of this can happen until the Obama administration ditches Ben Bernanke. He’s too smart to preside over the kind of foolish and short sighted policies they will be proposing. And for that reason alone, the Obama administration will have to get rid of him. Of course, Ben almost certainly see’s what’s coming as well, and it’s an environment with lower growth and higher inflation regardless of what he does. They've already painted the Fed Chief into an ugly and dangerous corner where the best option will be the one that does the least long term damage. There isn’t going to be any ‘good choices’ going forward so it’s entirely possible that he already wants to leave. If that’s so, it would be a shame for America because there is little chance that the Obama administration will appoint someone to the job who would be better able to manage it than him.

I’ve criticized Ben for his role in the bank bailouts as being too reactive, and not anticipating the hazards and pressures from the banks. I’ve also criticized him for not appreciating how economically illiterate the congress was, and for (apparently) believing that he and Henry Paulson could ‘handle’ them. But I think he’s always made it clear that he understands the threat of a politicized monetary policy. And I think the economically illiterate portions of the right are making a huge mistake to be demanding his head. They may win the battle, but it will help them lose the war.

California is now issuing IOU’s in place of actually paying their bills. This is the same as a person living hand to mouth paying their bills with post-dated checks….it can’t go on forever, or even for very long. Very soon someone is going to refuse to take one, and then the house of cards is going to come tumbling down. Practically the entire budget of California’s is a collection of unfunded mandates. Thanks to their tangled political process there are few options for the legislature to change things without the approval of the voters on one hand or the courts on the other. They are required to spend much of their tax receipts in very specific ways, but the government gets so little return on the money they spend that it’s never quite enough. And now the legislature is in deadlock because each of the parties has chosen a different group to champion, and each of those groups has a diametrically opposed agenda. The Republican’s have chosen the taxpayers and the private sector, and the Democrat’s have chosen the unions and the public sector….and never the twain shall meet.

That’s the real political battle line of the next decade in America. It’s a battle between a harried, heavily taxed, and otherwise much put upon private sector that’s been conditioned to believe it has no choice in what government does to it, and a bloated and pampered public sector that’s grown accustomed to dictating its own terms with regard to government spending. Across the country, politicians of both parties have generally favored the public sector as well because it’s the sea in which they swim. And rather than facing the challenges of managing spending, they’ve found it easier to use a dim and pliable mainstream media to manipulate the public into believing that it’s in their best interest to let this sham continue. But now, like it or not, it’s all coming out in California. And in California we are all looking at the future of America. Soon New York, Michigan, Illinois and New Jersey will be in the same dire condition as California, and close behind them will be the federal government.

California has contracted to spend far more than they are taking in. They can try to cut some less popular programs (if the unions allow them to), or maybe renegotiate some contracts, but that would be confrontational and civil servants don’t go for that sort of thing. If the people in government wanted to argue they would have gone to work in the private sector. They don’t want to have to worry about where the money is coming from like some poor dumb slob running a business… that’s the whole point of a civil service job. And the contracts for California’s civil service unions all reflect that. Politicians get into government because they want power not money, but most people who go to work for the government these days actually do it for the money. When all compensation is taken into account, performing a job for the government pays a little more than it would to do the same job for the private sector, and comes with much better job security. And it’s a peculiarity of government service that the low profile jobs are the ones that pay the very best.

For example, did you know that California pays more for each prison guard it employs than it does for each policeman? Can you figure out why? More than anything else it’s because the team that negotiated the contract with the prison guard’s union was more incompetent, less aggressive, and more easily manipulate (strong armed) by the union than the team that negotiated the policeman’s contract. That team pushed back against the union harder during negotiations and therefore got ‘the people’ a better deal. And that isn’t an isolated example, it’s a real trend. Until the Obama administration, union participation in America had been falling at a dramatic rate in every area of the private sector, and the only area of growth for unions was in government. They expanded into the place that offered the least resistance to them… where there was no one worrying about a maintaining a profit and they didn’t care if everything cost just a little more than it did last year.

That’s how California has ended up with 50,000 people, (all ‘no name’ middle level managers at obscure government departments), who are now retired on government provided pensions in excess of $100,000 every year, with free medical care for themselves and their families…for life. That’s also why the bulk of the still working (if you want to call it that) California civil servants receive such lavish medical care, and generous other benefits. It’s all because government has never had to worry about where the money would come from so there was no one acting as a check on the greed of the civil service unions. And the same states with deep penetration of unions into the civil service are also the very same states with the most serious fiscal problems.

So what will California do? They have few options. They can raise taxes to continue to pump the unions full of even more money, but frankly, they are already at the breaking point. If they raise taxes anymore the entire private sector of California will fold up their tents and move to low tax Nevada right next door. They already have one of the highest unemployment rates in the country in California and any tax increase will only make it worse. And even the recently retread ‘tax the rich’ schemes won’t work because those are the people for whom it’s easiest to leave. They can try to renegotiate with the unions but since that would involve politicians growing a spine, that’s not likely to happen. Right now the latest political magic bullet being discussed in the media is a ‘constitutional convention’ but these people can’t agree on a simple budget so what makes you think they can agree on a state Constitution? Thomas Jefferson and Sam Adams they are not. Besides, what kind of twisted and perverted requiem for freedom and liberty do imagine will come out of a constitutional convention that includes representatives from La Raza and ACORN? I shudder to think of it.

So how do they resolve all of this? Here’s my take. The vast majority of services that the California state government provides should be sold off to be managed in the private sector where someone competent can be brought in to make the changes necessary to make things work again. The government should continue to provide those services involving the use of force. The police, the prisons, the courts and other similar services should remain within the state. But the rest of the government services should be sold off to the highest private bidder, and the funds used to retire the massive state debt. Private bidders should be allowed to renegotiate with the unions and vendors, and charge what they think the market will bear for the service. And if they are really essential services that Californian’s would be willing to pay for and that the people really want, then there should be a more than adequate market for them. But if there is no bid from the private sector then maybe it something the state shouldn’t be doing either? After all, if the people don’t really need enough to be willing to pay for it then why are they doing it at all? Think of it as an extreme method for eliminating bureaucratic momentum. In short, the current ‘business of government’… the idea that it’s morally right to take money by force from one person and give it to someone else because some politician thinks they deserve it, should be ended in California once and for all. Instead, the size and scope of government should be slashed and the services it provides curtailed to the absolute minimum. That’s the only thing that will give California a clear and bright future. That’s what should happen…but we know how likely that is don’t we? Doing something like that would diminish the role of the government in the lives of the people, and THAT is the very last thing that the people running the government would ever want. Remember, politicians went into politics because they wanted power, not money. If they wanted money, they would have gone into the private sector like the rest of the chumps. And since its power they really want, its power that they will be unwilling to give up.

So we’re all at an impasse. California is burning and several other states (along with the federal government) are all close behind. The ‘public sector’ – ‘private sector’ clash is the big issue of our age and it’s the future for all of us. And we need to decide if we’re going to let them become our ‘public master’s’ in earnest, or if we’ll once again relegate them to the role of ‘public servant’. When you all decide … please call me in the Cayman Islands and let me know.

Tuesday, July 7, 2009

An excellent piece by David Kahane that explains the scope and magnitude of the lef'ts assualt on America. For Example:

I don’t know why I’m telling you this, but maybe now you’re beginning to understand the high-stakes game we’re playing here. This ain’t John McCain’s logrolling senatorial club any more. This is a deadly serious attempt to realize the vision of the 1960s and to fundamentally transform the United States of America. This is the fusion of Communist dogma, high ideals, gangster tactics, and a stunning amount of self-loathing. For the first time in history, the patrician class is deliberately selling its own country down the river just to prove a point: that, yes, we can! This country stinks and we won’t be happy until we’ve forced you to admit it.

In other words, stop thinking of the Democratic Party as merely a political party, because it’s much more than that. We’re not just the party of slavery, segregation, secularism, and sedition. Not just the party of Aaron Burr, Boss Tweed, Richard J. Croker, Bull Connor, Chris Dodd, Richard Daley, Bill Ayers, the Reverend Jeremiah Wright, and Emperor Barack Hussein Obama II. Not just the party of Kendall “Agent 202” Myers, the State Department official recruited as a Cuban spy along with his wife during the Carter administration. Rather, think of the Democratic Party as what it really is: a criminal organization masquerading as a political party.

Friday, July 3, 2009

Citing personal reasons, Sarah Palin is resigning as Governor of Alaska. Ordinarily I would link you all to a story that elaborated the details, but I’m not going to do that this time because I can’t find one that isn’t just as sneeringly condescending as everything else the mainstream media has written about her.

The attack on Sarah Palin was unprecedented. The only thing that's come close in terms of baseless sentiment disguised as unbiased journalism is it's polar opposite in the form of the pause-less adulation they've heaped on Barak Obama. The way the media treated her was worse than Bush, worse than Reagan. And now it looks like she’s decided that it’s no longer worth it. It’s not worth all the late night comedians joking about the rape of her 14 year old girl. It’s not worth the personal expense of defending herself from yet another utterly baseless ethics charge every couple of weeks. And it's not worth seeing the effect of all that hostility on her children and husband. The liberals in the press and in government have made it too poisonous for her.

Personally, I think I get it. I get how you can have one idea about how to help right the good ship America one day, and be ready to give up and move your business out of the country the next. I haven't been through the kind of slanderous attacks she has, and I'm ready to jump ship myself. These days it looks to me like the whole country, led by the Democrat party, has regressed to the nastiness of adolescence. And if Sarah has decided that it’s not worth putting up with that anymore, then I perfectly understand. I’m still a Sarah Palin fan. And I wish her nothing but the best.

Thursday, July 2, 2009

I don't have time for a full post on this today, but I wanted to toss out my current 'ad infinitum' talking point that my friends and the guys I work with are getting sick of hearing me say:

"Before this is over, it will turn to have been cheaper and more effective to let all the banks fail. We could have pushed them into bankruptcy court to be bought by "First National Bank of Odessa" or some other regional bank at bargain basement prices. Then the people who acted foolishly would have lost... as it's supposed to be.

The rules of the game would have remained the same and the economy could have come roaring back in relatively short order. Instead we're doing the Japanese "dance of the dead" where we spend a decade figuring out new ways to pervert the system to benefit politicians, ACORN and the unions. And the private sector learns to live with high unemployment and low growth.

I reject the Fed and Treasury's position on 'systemic risk'. The people involved in the losses would have failed, and the bond and stock holders who believed their nonsense would have failed, but the companies could have come back more rapidly under new 'more prudent' management."